Cain Incorporated reports net income of $15,600. Its comparative balance sheet shows the following changes: accounts receivable increased $6,600; inventory decreased $8,600; prepaid insurance decreased $1,600; accounts payable increased $3,600; and taxes payable decreased $2,600. Compute cash flows from operations using the indirect method. (Amounts to be deducted should be indicated by a minus sign.) Cash Flows from Operating Activities (Indirect) Adjustments to reconcile net income to net cash provided by operating activities Changes in current assets and liabilities
Cain Incorporated reports net income of $15,600. Its comparative balance sheet shows the following changes: accounts receivable increased $6,600; inventory decreased $8,600; prepaid insurance decreased $1,600; accounts payable increased $3,600; and taxes payable decreased $2,600. Compute cash flows from operations using the indirect method. (Amounts to be deducted should be indicated by a minus sign.) Cash Flows from Operating Activities (Indirect) Adjustments to reconcile net income to net cash provided by operating activities Changes in current assets and liabilities
Chapter1: Financial Statements And Business Decisions
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
Transcribed Image Text:**Cash Flow Statement Using the Indirect Method**
Cain Incorporated reports a net income of $15,600. Below are the changes in its balance sheet items, which need to be adjusted to compute cash flows from operations. (Note: Amounts to be deducted are indicated by a minus sign.)
**Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:**
- **Accounts Receivable:** Increased by $6,600
- **Inventory:** Decreased by $8,600
- **Prepaid Insurance:** Decreased by $1,600
- **Accounts Payable:** Increased by $3,600
- **Taxes Payable:** Decreased by $2,600
**Changes in Current Assets and Liabilities:**
1. Increase in Accounts Receivable: \(-\$6,600\)
2. Decrease in Inventory: \(+\$8,600\)
3. Decrease in Prepaid Insurance: \(+\$1,600\)
4. Increase in Accounts Payable: \(+\$3,600\)
5. Decrease in Taxes Payable: \(-\$2,600\)
These adjustments will help to reconcile the net income to the net cash provided by operating activities using the indirect method.
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